I refinanced and have two 1098 forms

[daniel-weiss]

 This didn't help:

 I see "Learn More" but not "Show More."

  I don't see any screen shots.

Am I in the wrong spot?

[Ebk68]

I have the same problem with TurboTax Deluxe CD which would not asking if the mortgage has been refinanced or not. So I switched to File TurboTax Online and works perfectly! At the Federal calculation: The software would asked if the mortgage has been refinanced and If you say yes then it would be calculated as zero balance at the end of the year; thus only letting the last Loan to be used as the balance calculation. Then at the end when you do the State Calculation it would give you question of how much balance at the end of the year for each mortgage that way it would adjust again at the State level. 

My regret is that even that I already paid for the CD version, I still has to pay separately for the online version! The online would NOT give you credit for the price you paid for the CD. I bought the CD at Costco and they are not allowing refund for Software CD. 

Good luck guys! 

[g92069]

Are you in California ? I am using the online version. It is NOT calculating the interest deduction properly in the state version.

[praveenkpadia]

I am having the same issue. Do we know if this issue is fixed yet?

[JantovenNF]

Having the same issue as well.  Notice that the issue is that TurboTax is ADDING the refi mortgage balances together instead of taking an average.  This is causing the mortgage interest to be phased out for me, when it shouldn't be.

I re-fi'd a 370k mortgage twice (married filing separately).  It registers my mortgage debt as over 1mil, when it was in fact never over 370k.  I notice on the Home Deduction Worksheet, it adds the 3 mortgages together.  The same issue is true for BOTH the federal and the California worksheets.

Doing a search on TurboTax's forums, it appears many people have had this issue, but TurboTax STILL hasn't resolved it, despite it going on for a year?

[jibrille]

I am having this exact problem. I was trying to figure out why my taxes were all messed up, and that it was calculating at over 1.2 million on my CA form when I should only have about $400,000 in debt.

I had 3 1098s:

1. Loan I paid off at the start of January (my original loan)

2. Refinance #1

3. Refinance #2

I'm digging through the forms and through the notes people listed earlier, but this is a mess.

[EnjoyABQ]

Within Forms, take a look at the 1st Home Mortgage Interest Worksheet (Home Int Wkst) and review the "Limitation Smart Worksheet" box. Mortgage interest is in Line 1 and Line 9 indicates "acquisition debt". Does the value in Line 9 look correct? If you believe that all interest is deductible then Line 9 = Line 1. If the value of home is > $750K and not grandfathered, then Box 9 < Box 1 by the ratio of 750/outstanding mortgage principal (I think). 

Now take a look at the 2nd Home Interest Worksheet and review #s like you did on 1st worksheet. If Line 9 seems correct, then the total interest deduction should be the Line 9 values from both worksheets summed.

Now go to the Tax and Interest Deduction Worksheet (Tax & Int Wks), and review the Mortgage Interest Limited Smart Worksheet box. You can modify line A2 and put in the sum of Line 9 from the 2 prior worksheets. This A2 line is incorrectly calculated by TT. It's a refinance not a second home so the mortgage interest does not need to be limited again. The prior worksheets already determined the limits. 

[karenrner]

How do you even FIND the forms to edit them???  This is a nightmare!

[4Blakes]

@DianeC958 I was able to get the right output when I zeroed out the Box 2 info for my refinance and the successive acquisition. On a side note, each of my 1098's are a hot mess when compared with the other ones. The origination and acquisition dates don't match. I'm not a huge fan of the IRS, but mortgage companies really need to get their acts together. It shouldn't be difficult to get the tax info correct - they certainly have no problem with balances, interest owed and due dates when I need to pay them each month.

[JantovenNF]

@4Blakes 

Unfortunately, for me, when I zero out the outstanding balance (which I don't think you are supposed to do), while it maximizes my return, it incorrectly calculates my average indebtedness.

Per the IRS guidance, I do not believe you are supposed to zero out the outstanding balance line, at least from my understanding.  This is why it is imperative for TurboTax to fix this immediately.  It would seem to be a simple fix - entering a line of code that calculates the average of #s, based on months of holding, as opposed to adding them up.  At least, I would think that should be an easy fix.

[karenrner]

The only fix I found that I am comfortable with is combining both 1098s and entering "one" 1098 with the combined total interest from our original loan and our refi.  TT does ask if "the amount you entering is different than your 1098" and will give you 160 characters to explain why.  

I am more comfortable explaining the reason why than attempting to manually override and change my "forms" in the CA state tax return.  I have been unable to figure out how to find those forms and manually edit them anyway.  I'll take my chances.  Hopefully my explanation will be sufficient for the IRS and will not trigger any audits...  

Thanks for the pain, TT.  Fix your product!

[ReneeM7122]

In the case of a refinance, it's best to enter the 1098 from your original loan before the 1098 from your refinance. This will help the software to recognize that the origination date of the loan is pre-2020.

That's important because [only] the acquisition debt remains deductible.  The loan origination date section should present itself correctly when the software recognizes that you've entered two 1098 forms in order.  

Here's how to enter your mortgage interest statements in TurboTax:

1. With your return open, search for 1098 and select the Jump to link in the search results.
2. Follow the instructions to enter your 1098 info.

@4Blakes

[JantovenNF]

@ReneeM7122 

This is not correct.  We have many threads running in which it has been shown that the software is creating an issue in terms of calculating outstanding mortgage debt.  

[JantovenNF]

@karenrner 

In terms of editing / overriding, to my knowledge, you can only do this on the desktop version, not the online version.

Reading the threads, what you can override is the line that calculates the average outstanding mortgage debt you have - i.e., the issue we are having.  So if you calculate by hand what your average mortgage was for the year, using the IRS' method, you can input that value and override TurboTax's incorrect calculation, which should make all of your numbers in turn accurate.  At least, this is my understanding, based off of what the desktop users have reported.  Just to answer your question about forms, overriding, etc.

[HuntlyG]

My mortgage is around 1 Million and I refinanced last year. If I put both 1098's in turbotax, including the amount in box 2 then my deduction is severely limited. I can test this by summing up the interest payments and including them in one 1098 entry in TT with the amount in box 2 being the beginning of the year and the deduction is significantly more. 

In other words, if I do everything TT tells me to do then I get penalized for doing a refinance. I answered all of the questions and said that one mortgage was paid off and it did not seem to make a difference.  I am pretty sure that there is no such thing as a refinance penalty so something is not working. 

After playing around there are a couple of options to fix this (it is a hack but it appears to work).  I can sum up the interest in to one 1098 as mentioned above- this will make it so TT does not match the individual 1098's though. Also, I can enter both 1098's but in the new loan I put 0 in box 2- again makes it so TT does not match the 1098's. 

Anyone have advice on doing either of those options? I would rather hack TT than miss out on thousands of dollars in a deduction.